Magazine

QDIA Analysis | Published in September 2016

How Competitive Are Balanced Funds?

Spotlighting industry data from PLANSPONSOR’s proprietary research

By PLANSPONSOR staff | September 2016

The Pension Protection Act (PPA) and the resulting qualified default investment alternative (QDIA) regulation turned the prevailing wisdom about defined contribution (DC) default investments on its head. Of the three QDIA options—balanced funds, target-date funds (TDFs), and managed accounts—TDFs get used most, but could a balanced fund be just as good for many participants?

The corresponding charts look at the returns of balanced funds against the market as a whole and against an average measure of TDFs. Although the TDF average is an imperfect measure, it gives a sense of equity exposure per vintage—and it is interesting to see that the balanced fund appeared competitive—that it bested the TDF option.

Balanced Fund Overview*

 1-Yr,
Ending 6/16
3-Yr,
Ending 6/16
5-Yr,
Ending 6/16
10-Yr,
Ending 6/16
Balanced2.94%7.89%8.23%6.57%
S&P 500 Total Return USD3.99%11.66%12.10%7.42%
Barclays US Aggregate
Bond Total Return USD
6.00%4.06%3.76%5.13%

S&P 500 Total Return USD/Barclays US Aggregate Bond Total Return USD

 1-Yr,
Ending 6/16
3-Yr,
Ending 6/16
5-Yr,
Ending 6/16
10-Yr,
Ending 6/16
50/5057.867.936.28
55/454.98.248.356.39
60/404.88.628.766.51
65/354.799.186.62
70/304.599.389.66.74

Balanced Funds Compared With Target-Date Funds

 Average Asset Allocation % EquitiesEnding 6/16 Total Assets $mm10-Yr, Ending 6/16 Net New Flows $mm1-Yr, Ending 6/16*3-Yr, Ending 6/16*5-Yr, Ending 6/16*10-Yr, Ending 6/16*
Balanced56.25467,315-12,4582.94%7.89%8.23%6.57%
Balncd - Bond-biased31.9397,97725,3561.86%5.14%5.40%5.11%
Balncd - Eqty-biased77.94115,962-20,285-1.85%6.74%6.86%5.06%
Targt-date - In-Rtrmt25.8127,2409,8762.47%4.46%4.51%5.01%
Target-date 2000 - ’1037.3730,4582,7541.94%5.37%5.28%5.09%
Target-date 2011 - ’1540.4357,84929,7511.47%5.92%5.83%5.45%
Target-date 2016 - ’2041.48135,86974,3120.79%6.24%6.11%5.38%
Target-date 2021 - ’2553.74121,96081,8170.23%6.76%6.64%5.61%
Target-date 2026 - ’3063.78133,46582,694-0.77%6.93%6.79%5.46%
Target-date 2031 - ’3570.892,79764,442-1.39%7.23%7.12%5.63%
Target-date 2036 - ’4071.1995,12161,921-1.98%7.21%7.10%5.57%
Target-date 2041 - ’4579.1756,64342,406-1.96%7.32%7.27%5.75%
Target-date 2046 - ’5078.0843,90934,330-2.04%7.26%7.15%5.35%
Target-date 2050+83.9915,28414,003-1.92%7.43%7.38% 
S&P 500 Total Return USD  3.99%11.66%12.10%7.42%

*Weight by end annualized total return
Source: Strategic Insight

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